Archive for October, 2008

With the exception of bouncing checks left and right, bank fees aren’t necessarily going to “break the bank” – but at a time when everyone is trying to cut back and spend less, saving money on unnecessary bank fees can add up to savings over time. Here are some tips for avoiding bank fees:

• Use a bank with free checking. There are so many banks offering checking accounts without a monthly maintenance fee that you’re probably wasting your money if you’re paying a fee to keep an account at a bank.
• Forget about “float.” It used to be that you could write a check and know you had a good week before it would get cashed! These days, checks can be processed as quickly as swiping your debit card.
• Stop paying ATM fees – use your ATM card at your own bank only. Why give another bank $1.50 to $3 to withdraw your own money?
• Know your bank’s policy regarding using your debit card for shopping – some banks charge a fee when you swipe the card and use your PIN (debit) but charge nothing if you choose “credit” at checkout!
• Give yourself your own overdraft protection by depositing an extra $100 or so (don’t record it in your check register). If you make a mathematical error, you’ll have a buffer of your own money to rely on rather than having to pay the bank bounced check fees.

If you’re one of the two million people who’ve received a foreclosure notice this year, you might be concerned regarding your ability to vote on November 4. Concerns were voiced after a report noted that GOP officials in the state of Michigan planned to use the list of foreclosures to challenge voters’ eligibility at the polls.  (The GOP has since announced that it wouldn’t do so.)

With the number of foreclosed homes in the United States at an all-time high, the potential confusion voters may have over this issue might keep them from hitting the polls next week.

Rosemary Rodriguez of the United States Election Assistance Commission states that foreclosure does not take away the right to vote. If your home has been foreclosed on, or if you’ve received a foreclosure letter, you can still vote. If a poll worker should attempt to deny you a vote, and you believe you are a registered voter, challenge the poll worker to prove that you’re ineligible to vote.  (This year, there should be any number of people at various voting locations across the country who’ll be happy to help you defend your right to vote.)

If worse comes to worst, simply ask for a provisional ballot.  (The problem with that is that provisional ballots are much more likely to be cast aside uncounted than a regular ballot is.)

As Americans struggle to weather economically challenging times, more small town governments are looking at innovative uses of existing technology as a way to give residents new options for controlling rising costs. Take, for instance, the golf cart.

There was a time when golf carts were restricted to the golf course, a few forward-thinking resort areas that wanted to protect environmentally sensitive ecosystems and certain planned golf communities like Peachtree City, Georgia, which offers 80 miles of golf cart paths that are used by the whole community, including high school students.

But even while currently stable gas prices have given Americans some respite from last summer’s record-high prices, interest in golf carts as a means of affordable intra-city transportation is growing.

For several years now, golf carts as the primary mode of transportation have been the norm, not the exception, in the village of Bald Head Island, just like Santa Catalina Island off the Los Angeles coastline. At McIntosh High School in Peachtree City, Georgia, students use a specially designated golf cart parking lot on campus.

Ordinances permitting golf cart use on city streets have been passed or are being considered in towns throughout Colorado, Georgia, Illinois, Indiana, Iowa, Minnesota, North Carolina and Virginia.

While local and state laws vary, owners of battery-powered golf carts in these towns can drive them on roads with a posted speed limit of less than 35 miles per hour. Safety concerns persist, however. Under-age drivers have been seriously injured in accidents with larger motor vehicles.

Most towns that have given the thumbs up to golf carts require they be outfitted with headlights, windshield wipers, seat belts and turn signals to make them street-legal. The carts need to be recharged about every 30 miles.

As Americans begin to feel the withdrawal pains of lessening our dependence on foreign oil, we’ll need to consider every possible way to lessen consumption and come up with alternatives to automobile-dominated culture.

What’s happening in your community? Are you seeing any golf carts zipping around?

The bills need to be paid. Your family needs to be fed. The student loan repayments aren’t going away anytime soon. And there’s just not enough income to go around, it seems, for more households struggling to adjust to the new reality of higher prices that may be here to stay.

Unless you have I-walk-on-water-credit, you’re not going to qualify for a loan or a home equity line of credit. And for some people, taking on a second job or selling your junk on eBay just isn’t going to be enough. They need a big infusion of cash, and quick.

What to do? For an increasing number of women, one or more egg donations fits the bill. A healthy, young woman in her 20s can earn between $5,000 and $10,000 for a single egg donation, which can be used by an infertile couple who cannot produce a baby on their own.

According to some reports, fertility clinics are seeing a 40% increase in egg donations which they attribute to a worsening economy.1

Aside from certain ethical questions about selling one’s eggs for profit, the procedure is not without physical risk of harm to the donor. Women who are accepted for egg donation (there’s a lengthy vetting process) must undergo up to three weeks of hormone injections to stimulate egg production, not to mention blood tests and ultrasound monitoring by the fertility clinic. Harvesting of the egg is done under general anesthesia and like any surgery, that involves risks, too.

What about you? If you were of the right sex and age, would you donate an egg for a nest egg? Or is it a trend that’s just too extreme to consider?

1 “Egg Donations Up in Weak Economy,” CBS3, October 13, 2008

Today marks the 79th anniversary of Black Tuesday.

For many Americans with a long memory, October 29, 1929, was the opening act in what would become the Great Depression.

Black Tuesday was actually one of two horrific trading days in a stock market that had begun falling over a month earlier. After peaking in September at 381 points, the Dow Jones Industrial Average began its descent, finally plunging 12.8% on Black Monday (Oct. 28, 1929) and another 12% on Black Tuesday. The domino effect kept stocks in a freefall until the market finally hit bottom in July 1932.

The stock market crash didn’t just affect stockbrokers. It rocked the world of nearly every American in a period lasting from the late 1920s to the 1940s, wiping out life savings, contributing to massive unemployment and causing the collapse of banks and businesses. During the darkest days, 15 million Americans, or one-quarter of the population, were unemployed, and by early 1933, more than 5,000 banks had failed.

Franklin D. Roosevelt’s New Deal reforms, launched in 1932, were meant to lift the country out of the Depression through government intervention. The New Deal reforms included a series of banking reform laws, emergency and work relief programs and farming programs that helped pull an ailing economy off life-support.

“In the short term, New Deal programs helped improve the lives of people suffering from the events of the depression. In the long run, New Deal programs set a precedent for the federal government to play a key role in the economic and social affairs of the nation,” according to the Library of Congress.

There are many differences between the economic conditions in 1929 and those of today, and most economists doubt the challenges we now face will rival those of the Great Depression. Still, the 79th anniversary of Black Tuesday seems like a fitting time to note some striking similarities. The timing of the economic crisis, then and now, followed years of a roaring bull market and an equal dose of “irrational exuberance” among investors. A rising tide of bank failures, increasing unemployment and the loss of life savings to a falling stock market all sound like they could have been taken from the pages of a school history book.

What lessons do you think we can learn from the pages of history? What role should government play in the lives of its citizens?

What’s behind the uptick in existing and new home sales? Dropping down the credit crisis rabbit hole of the last four weeks has had a little bit of an Alice-in-Wonderland feel to it. Nothing is as you expected it would be.

Confounding expectations, existing home sales increased in September by 5.5%, the National Association of Realtors (NAR) reported Friday. The turnaround reflects a modest increase in the sale of existing single-family homes and condos compared to August sales, according to NAR.

And the U.S. Census Bureau’s monthly report shows that sales of new construction also rose in September, by 2.7% compared to August.

Must be good news, right? Well, sort of. Because while home sales increased, the national median sales price for existing homes fell 9% in September from a year ago. A year ago, foreclosures made up a relatively small share of sales, but distressed sales now represent 35 to 40% of sales transactions, says NAR, so you can blame these foreclosed properties, which usually sell at a discount, for dragging down the median sales price.

As for the rise in new home sales, well, let’s put that in perspective. New home sales rose 2.7% from a month earlier, but they’re still 33% lower than they were a year ago. Builders are moving inventory by sheer force of will, slashing prices and using a wide assortment of gimmicks and incentives to attract bargain-hunting buyers, including everything from free upgrades to a free Disneyland vacation.

Total housing inventory remains high, with a 9.9-month supply in existing homes at the end of September, down from a 10.6-month supply in August. New construction properties have about a 10.4-month inventory.

Still, most economists don’t expect the heightened sales activity to continue in 2008, since most of September’s sales occurred before the economic crisis fully unfolded late in the month. It’s clear we still have a ways to go before the housing market works out all the bad loan kinks.

A recent Pew Research Center poll shows that just 11% of Americans are satisfied with the way things are going in the country today. That’s the lowest level ever recorded by a Poll research survey. (One has to wonder how even 11% of those surveyed could be happy with the current state of affairs, unless, say, you’re a blissfully unaware preschooler or billionaire.)

More consumers are taking concrete steps to rein in their spending, according to the October 9-12 poll, compared to just a few weeks earlier in September. More people are now saying that recent economic events have caused them to scale back vacation plans (59%), eat out less often (55%), postpone major purchases (39%), delay home buying or home improvements (38%) and defer new car purchases (36%). This trend has retailers, car dealers and restaurateurs in an absolute tizzy, so expect to see continued deep discounts in everything from Christmas toys to SUVs.

And for the first time in a Pew survey, more people say that Americans should learn to live with less (49%) than those who say, “There are no limits to growth in this country” (41%).

There’s pretty broad agreement about how we got into this mess, with a majority of those polled blaming people who took on too much debt (79%) or banks making risky loans (72%). Far fewer point the finger at weak government regulations (46%), a complicated financial system (36%) or growing global financial ties (35%).

Has the nation’s economic crisis forced you to change your spending habits?

As the politicians continue to hammer out the details of the $700 billion bailout package and the Dow perfects its bungee-jumping abilities, my friends and neighbors are wondering how they’ll pay this winter’s heating bills and watching their kids’ 529 college savings plans shrivel up.

America’s economic pain has taken center stage in the race for the White House. Sen. Barack Obama recently suggested that we should be able to withdraw up to 15%, or as much as $10,000, of our IRA or 401(k) without getting slapped with the 10% IRS tax penalty for early withdrawal before reaching 59 years, six months. The ability to tap these retirement funds would extend through 2009 for families who may be forced to make some difficult, and very painful, financial decisions.

While the goal behind Obama’s idea is laudable, the idea’s a bad one, in my opinion, for any but those who are backed into a corner with no other options.

Both IRAs and 401(k) plans were created by Congress (in 1974 and 1980, respectively) to help families save for retirement. Both plans are very popular because you can make pre-tax contributions in which both the principal and interest compound tax-free until you’re ready to withdraw the money in retirement. This allows your money to grow much faster than if it were subject to income taxes year after year.

Under current law, the 10% tax penalty is waived for individuals who can prove hardships (such as excessive medical expenses) or for first-time homebuyers. Obama’s proposal would eliminate the need to demonstrate hardship and let anyone withdraw those funds, but only up to $10,000. Still, this would allow people to withdraw 30% of investments earmarked for retirement during the next 15 months.

Automatic contributions regularly withdrawn from your paychecks have probably fattened up your 401(k) quite nicely during the long-running bull market. But while it’s awfully tempting to dip into those future reserves for today’s needs, resist the temptation.

Here’s why. Even with the waiver of the 10% IRS tax penalty, withdrawals would still be subject to a 20% federal income tax. And selling mutual funds or stocks now, with the stock market in a nosedive, means you’ll be further penalized for having the worst possible timing. The closer you are to retirement, the fewer years you’ll have to rebuild your retirement nest egg.

If you’re working now, that means you still have an opportunity to get through this recession intact, by taking on a second job if you have to, restructuring your budget or pruning household expenses. But once you get into your 60s or 70s, you might not have the option of continuing to work (if you wanted or needed to), due to unforeseen health problems. Once retired, you’ll depend on the proverbial three-legged stool to get by ⎯ personal savings, Social Security and, if you’re lucky, a pension. Don’t risk a less-than-comfortable retirement if, by exploring all of your other options today, you can find a way to make it through these tough times.

Back in April, voters in my hometown approved a $39 million construction budget to expand the high school. The architects told us that’s what it would cost to add more classrooms, redesign the gym and add an artificial turf stadium, among other things. But when actual project bids came in $6 million over budget, project managers blamed the rapidly rising costs of building materials for the shortfall.

So, in a special referendum last week, taxpayers were asked whether we should ante up the $6 million. The $6 million add-on was defeated by 26 votes (one vote in excess of what would trigger an automatic recount, according to state law).

So the school board is busily weighing its options and trying to figure out if it should rebid the whole project, rebid part of it or just eliminate certain aspects of the expansion.

It’s been a pretty contentious issue for my town, with seniors living on fixed incomes saying it’s not fair to burden taxpayers with such a substantial project during unsettled economic times, while parents plead for taxpayer support, claiming that severe overcrowding is hampering their children’s ability to learn.

The whole thing could just be a moot point. Even though voters approved the $39 million expansion, trying to move forward could be futile, considering the current national/global liquidity crisis.

“This is a complete game-changer,” the town finance board chairman said. “Even the triple-A rated municipalities can’t get money.”

So regardless of what the final version of the school expansion project looks like, there’s no guarantee the town will be able to fund the project. If the town somehow manages to borrow the money, the cost of the loan could be much, much higher.

As the credit crisis hits close to home, there’s already news of major cities and even states that are putting major infrastructure improvements on hold. What’s happening in your hometown?

People are hurting these days, that we know.

You’ve probably heard about some homeowners literally walking away from their properties because they’re “upside down” on their mortgages, meaning their homes are now worth less than the balance they owe. Similar things have happened with some motor vehicles that are now worth less than the balance of the loan, most especially those once-popular, gas-guzzling behemoths like the Chevy Suburban or GMC Yukon.

When money gets tight, some drivers are willing to try almost anything ⎯ even driving their vehicle into a lake ⎯ to try to get out from under that debt. Flood the car, report the vehicle as stolen, and hope to collect a quick insurance settlement.

Is today’s deteriorating economy creating a boom time for the car insurance fraud business? Or is the rate of insurance fraud one of those sure bets in life you can count on, like death and taxes? I checked in with the good folks at the National Insurance Crime Bureau to ask those very questions. You may be surprised by the answer.